Potash gave up ground again yesterday, and a large trade is positioning for further losses.

optionMONSTER systems show that a trader sold 10,000 January 25 puts for the bid price $1.13 and, seconds later, bought 5,000 January 28 puts for $2.32. Volume was above open interest in the 25s but below it in the 28s.

The trader could be rolling a short-put position to a lower strike and doubling the size, but it is far more likely that this is a new ratio spread that would generate a maximum profit with POT down around $25 at expiration. That spread cost the trader just $0.06, which is the amount at risk if shares are above $28, so this is a low-cost way of taking a downside position. (See our Education section)

POT fell 8.31 percent to $29 even, continuing to fall with other fertilizer names for the second day in a row. The stock was last down at $25 in March 2009.

More than 179,000 POT options traded yesterday, compared to a daily average of 31,390.


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